Former ECB chief economist attacks central bank over deflation-fighting policies

Declining inflation rates in the eurozone have an effect similar to a tax cut, Juergen Stark argues

Worries about a possible deflation in the eurozone are becoming „paranoid,” the former chief economist of the European Central Bank, Juergen Stark, warns in an opinion piece for Swiss daily Neue Zürcher Zeitung. “The danger of an outright deflation, seen by international institutions and many market participants, does not exist,” reckons Stark, who is also a member of the cep’s board of trustees. To the contrary, declining inflation rates and the achieved price stability in the eurozone are having the effect of a tax cut, Stark argues. It remains, thus, incomprehensible why the ECB has the intention to do everything it can to get inflation rising again in the short term.